HELP! Reporting 409A Corrections

[Guest ExecComp]

I am correcting a missed nonqualified deferred compensation distribution under the IRS correction procedure. Pursuant to the correction, I'm allowed to treat the distribution that should have been made in 2011 as if it had been made this year (it's below the 402(g) limit). We have also decided to reimburse the employee for the 20% penalty.

We are reporting the distribution for the former employee on a 2013 Form W-2. How do we report the amount we're giving to reimburse for the 20% penalty?

Because he is no longer an employee, I'd normally think we'd report on a 1099. But since we're already issuing a W-2, should the reimbursment also go on the same W-2? Should we withhold FICA/FUTA/SUTA?